The Constitutional (One-Hundred and First) Amendment Act, 2016 which was enacted on September 16, 2016 made crucial changes to the Constitution of India, 1950 and lead to introduction of Goods and Service Tax regime in India.
The most striking feature of the Constitutional Amendment was to grant concurrent taxing powers to both the Centre and the States with respect to goods, services and both. In order to ensure this concurrent power, basic taxing entries that were present under List I and List II of the Seventh Schedule were either omitted or significantly amended and the field of taxation along with levy to tax was unified under a single Article, i.e., Article 246A.
Therefore, Goods and Service Tax is a unique tax which finds both power as well as field of legislation under a single Article, i.e., Article 246A and has no supporting entry in the seventh schedule. Emphasising on this peculiar feature of Goods and Service Tax, a unique petition has now been filed before the Hon’ble Punjab and Haryana High Court, wherein, the petitioner has challenged Constitutional Validity of Section 69 and Section 132 of the Punjab Goods and Service Tax Act, 2017.
The Challenge is primarily based on the argument that Section 69 (arrest) and Section 132 (which makes certain acts offences and prescribes maximum punishment of 5 years) are criminal in nature and thus, could not have been enacted under Article 246A. Further, the contention is supported by placing reliance upon entry 93 of List I and entry 64 of List II of the seventh schedule. While entry 93 of List I provides the field to make criminal laws with respect to matters in list I to the Parliament, entry 64 of List II provides similar field of legislation to the States; therefore, the argument that as making an offence amounts to enacting a criminal law, Section 69 and Section 132 could not have been enacted under general power to levy tax under Article 246A and thus, are beyond the legislative competence of the States.
Though the argument appears to be appealing on the first reading, it can be found to be misplaced because of the following reasons:-
Firstly, scope of Article 246 A is significantly wide and its scope is not same as erstwhile taxing entries.
Article 246A reads as: “Special provision with respect to goods and services tax.-
(1) Notwithstanding anything contained in article 246 and 254, Parliament, and, subject to clause (2), the legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by such State.
The words ‘laws with respect to’ are of paramount importance here. Article 246A not only empowers the legislature to merely levy tax or enact Goods and Service Tax Act, it grants the power to make all laws ‘with respect to’ or as it may be stated ‘in connected with’ or ‘pertaining to’ Goods and Service Tax. Thus, it must necessarily include the power to enact offences ‘with respect to’ goods and service tax and Article 246A must be interpreted widely and the term ‘with respect to’ must be given expansive meaning.
Secondly, even if it is to be believed that power to make offences in relation to evasion of goods and service tax is not founded under Article 246A, then, the same can be found under Entry 1 List III.
Entry 1 List III reads as:- “Criminal law, including all matters included in the Indian Penal Code at the commencement of this Constitution but excluding offences against laws with respect to any of the matters specified in List I or List II and excluding the use of naval, military or air forces or any other armed forces of the Union in aid of the civil power.”
The term ‘Criminal Law’ used in the above entry is significantly wide and includes all criminal laws except the exclusions: laws made with respect to matters in List 1 and List 2 and laws relating to Armed forces.
The term ‘Criminal Law’ in entry 1 List III has been interpreted on numerous occasions (while interpreting vires of TADA Act, Prevention of Corruption Act etc) and in a significant judgment of the Hon’ble Supreme Court in Kartar Singh v. State of Punjab, (1994) 3 SCC 569; Hon’ble Mr Justice Sahai concurring with the majority has emphasised on the need and scope of entry 1 list III. It has been stated that the language used in the entry is couched in very wide terms and the term ‘criminal law’ would validly include anything which is criminal in nature and thus, full play to legislative entry has to be given. Further, it is stated that the term criminal law means any Act or Rule dealing with crime and what is a crime in a given society changes with change in political, economic and social-set up of the country and various industrial and taxation statutes are an ample example of the same. The Constitutional makers foresaw this eventuality and therefore, they empowered both Centre and States to make laws in this regard and the power here includes power to define a crime and to provide for its punishment. Entry 1 List III will not only include crime under Indian Penal Code, but any matter, which could reasonably and justifiably be considered as a crime.
Thus, even if Section 69 and Section 132 could not have been enacted in pursuance to power under Article 246A, they could have been validly enacted under entry 1 List III, as laying down of a crime and providing for its punishment is ‘criminal law’.
Further, the argument that since power to levy GST is under Article 246A, power in relation to GST cannot be found under Article 246 and help cannot be taken from entries in schedule seven, is also mis founded, as, Article 246A would over-ride Article 246 only in cases of conflict and not when there is no conflict at all.
Therefore, it does not appear that there is any legislative infirmity in enacting Section 69 and Section 132 and thus, this significant power in the hands of the State shall not be curtailed.